The delivery process of Gilts through CREST
Delivery of the underlying Gilt stocks, in respect of Euronext.liffe
Long Gilt contracts, are made through CREST usually by using the
CREST book entry transfer system or possibly by using Stock
Transfer Forms (STFs) accompanied by the appropriate physical cer-
tificate(s) for private clients. Matching acceptance instructions must
be input by the Transferee via its CREST terminal. Payment for the
delivered Gilts will be made to LCH.Clearnet from the Transferee via
the CREST book entry system.
Transferors must deliver Gilts to LCH.Clearnet by the method
specified on the Seller’s Delivery Notice.
The Transferor must input the necessary confirmed inward delivery
details via their CREST terminal. Sellers must ensure that sufficient
Gilts are in their Transferor’s CREST account to meet the delivery in
full so that the delivery will not fail. Payment for delivered Gilts is
made to the Transferor through the CREST book entry system.
Not all clearing members have direct access to CREST accounts,
but often their clients will have their own accounts. If the clearing
member delegates the function and allows their clients to deliver the
Gilts directly to LCH.Clearnet’s account in CREST, then they must
ensure that the clients understand the procedures and timings
exactly. Ultimately, whatever the client does or does not do, the
responsibility always lies with the clearing member. In this situation,
the clearing member can have very little control over what happens.
Commodity futures delivery
Commodity futures will have very different processes for delivery,
depending on the type of commodity that underlies the future.
For example, the IPE Brent Crude future delivery mechanism is
shown below.
IPE Brent Crude Delivery Mechanism
Unit of trading
One or more lots of 1,000 net barrels (42,000 US gallons) of Brent
crude oil.
Specification
Current pipeline export quality Brent blend as supplied at Sullom
Voe.
68 Clearing and settlement of derivatives
Futures processing 69
Cessation of trading
Trading shall cease at the close of business on the business day
immediately preceding the 15th day prior to the first day of the
delivery month, if such 15th day is a banking day in London. If the
15th day is a non-banking day in London (including Saturday),
trading shall cease on the business day immediately preceding the
first business day prior to the 15th day. These dates are published
by the Exchange.
Delivery/settlement basis
The IPE Brent Crude futures contract is a deliverable contract
based on EFP delivery with an option to cash settle against the
published settlement price i.e. the IPE Brent Index price for the
day following the last trading day of the futures contract.
If the contract is to be subject to the cash settlement procedure
notice must be given (in accordance with LCH.Clearnet proce-
dures) up to one hour after cessation of trading.
The IPE Brent Index
The Exchange issues, on a daily basis at 12 noon local time, the
IPE Brent Index which is the weighted average of the prices of all
confirmed 21 day BFO deals throughout the previous trading day
for the appropriate delivery months. These prices are published
by the independent price reporting services used by the oil
industry.
The IPE Brent Index is calculated as an average of the following
elements:
1. First month trades in the 21 day BFO market. IPE/Brent
Crude Futures Contract Spec/3.
2. Second month trades in the 21 day BFO market plus or minus
a straight average of the spread trades between the first and
second months.
3. A straight average of all the assessments published in media
reports.
Payment
Payment for contracts subject to the cash settlement procedure
takes place through LCH.Clearnet within two business days of the
cessation of trading.
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